NELFUND May Face Crisis as Experts Warn Over Student Loan Repayment

Nigeria’s student loan scheme faces scrutiny as experts demand clearer repayment guidelines, audited accounts and sustainable funding for NELFUND.

Education and finance experts have warned that the Nigerian Education Loan Fund (NELFUND) could struggle to sustain its student loan scheme unless the Federal Government establishes an effective loan recovery system before repayments begin around 2028.

The warning was issued during a webinar titled “Can NELFUND Sustain Itself? Financing Nigeria’s Student Loan Scheme,” organised by the iRead To Live Initiative in partnership with BudgIT Foundation.

The concerns follow NELFUND’s disbursement of approximately ₦372.62bn to students across 319 institutions within two years of the scheme’s commencement.

Unveiling a policy brief at the webinar, the Executive Director of the iRead To Live Initiative, Jacob Sule, said Nigeria’s previous student loan schemes, introduced in 1972, 1988 and 1993, failed partly because they lacked effective mechanisms for recovering loans.

The report stressed that the volume of money disbursed by NELFUND does not necessarily prove the scheme is financially sustainable, as no group of beneficiaries has yet reached the repayment stage.

It warned that the period before repayments begin presents a critical opportunity for the government to address potential weaknesses in the system.

One major concern is how NELFUND will track beneficiaries and recover loans in Nigeria’s largely informal economy.

Under the Students Loans (Access to Higher Education) Act, 2024, repayments are capped at deductions of 10 per cent of a beneficiary’s gross monthly income. Enforcement cannot begin until two years after the completion of the National Youth Service Corps.

However, the policy brief warned that relying heavily on employer deductions could undermine recovery efforts, particularly when many beneficiaries are self-employed or work in the informal sector.

It recommended integrating NELFUND with Nigeria Revenue Service income data to improve the identification and tracking of borrowers.

Professor of Public Administration Isaac Obasi also questioned how the government would determine borrowers’ earnings and calculate repayments in an economy dominated by informal employment.

Obasi urged the government to establish a reliable statutory funding arrangement and resolve uncertainty surrounding whether NELFUND loans are interest-free.

Although NELFUND’s statutory funding sources include the Development Levy, government appropriations, loan repayments and investment income, the report expressed concern over the Fund’s reliance on ad hoc transfers, including recovered proceeds of crime and executive directives.

It called for a clear formula for distributing the Development Levy and safeguards to ensure the Fund’s financing is predictable rather than dependent on political decisions.

The policy brief also questioned NELFUND’s description of its loans as interest-free, noting that the 2024 Act does not expressly state that the loans are interest-free and contains provisions referring to interest and other charges.

The report urged the National Assembly to amend the relevant provisions or for NELFUND to issue a clear position before the first repayment cohort enters the enforcement period.

Educator and human resources strategist Professor Yomi Fawehinmi criticised the removal of a means-test provision from the student loan legislation, arguing that the scheme was no longer clearly targeted at students from low-income households.

He also questioned increases in tuition fees by some institutions, which he said had risen by as much as 600 per cent, arguing that higher charges could undermine the scheme’s affordability objectives.

Fawehinmi further called on the government to give greater attention to basic education and the large number of out-of-school children, rather than concentrating so heavily on higher education financing.

He also raised concerns about the scheme’s long-term continuity and whether it had addressed persistent problems involving university funding, infrastructure and educational quality.

The policy brief recommended an independent, institution-level audit of NELFUND disbursements and the publication of audited accounts to strengthen public confidence.

The recommendation followed an earlier statement by the Independent Corrupt Practices and Other Related Offences Commission alleging that only ₦28.8bn of ₦100bn released to institutions had reached students. The ICPC later retracted the statement, attributing it to a drafting error and clarifying that no disbursement discrepancy had been established.

The report also called for regular publication of beneficiary data by gender, state and geopolitical zone, alongside disability information where feasible.

Participants at the webinar raised additional concerns about data protection, repayment timelines, unclear guidelines and delays in loan disbursement. One graduate beneficiary recounted how a system glitch left students at his university without fees and upkeep for an entire academic session.

The speakers agreed that NELFUND must develop a comprehensive repayment framework before 2028, clarify its interest-free position, secure stable funding and improve transparency.

The policy brief concluded that the future of NELFUND will depend not only on how much it disburses, but also on whether it can recover loans effectively and maintain reliable funding over the long term.